NCERT Solutions for Class 12th Microeconomics Chapter Chapter 1 – Introduction

National Council of Educational Research and Training (NCERT) Book Solutions for class 12th
Subject: Economics
Chapter: Chapter 1 – Introduction

These Class 12th NCERT Solutions for Economics provide detailed, step-by-step solutions to all questions in an Economics NCERT textbook.

Click Here for Class 12 Economics Notes.

Class 12th Economics Chapter 1 – Introduction NCERT Solution is given below.

Question 1. Discuss the central problems of an economy.

Answer We know that resources are limited In relation to the unlimited wants, it is important to economise their use and utilise them in the most
efficient manner.

It leads to following central problems, that are faced by every economy.

(i) What to Produce?

There is limited resources and thus producers can not produce all the goods, in an economy.

So, every economy has this problem thai what to produce and in what quantities. It has two dimensions
(a) Kinds of goods to be produced
(b) Quantity of goods to be produced.
(ii) How to Produce?

This problem refers to the selection of technique to be used for production of goods and services

There are various techniques available to produce goods
(a) Labour Intensive Techniques
(b) Capital Intensive Techniques

Thus. it is difficult to allocate the resources efficiently and effectively.

(iii) For Whom to Produce?

Due to lack of resources in every economy, can not satisfy all the wants of its people.

So, there is problem to select the category of people who consume the goods. Whether to produce goods for rich section or poor section of society or more for rich and less for poor section.

Thus, every economy faces the problem of allocating the scarce resource to the production of different possible goods and services and distribution of
these among the individuals with in the economy. The allocation of scarce resources and the distribution of the final goods and services are the
central problem of any economy

Question 2. What do you mean by the production possibilities of an economy?

Answer We have scarce resources and there is a problem exist what to produce and in what quantity. Thus, we are taking the help from the
production possibility curve. It tells us how we can combine two goods the can be produced with the given resources on the assumptions
(a) resources are fully and efficiently utilised and (b) technique of production remains constant or we can say produced possibility impllies
the possible situation to produce two goods with given resources an technology.

Question 3. What is a production possibility frontier?

Answer It refers to a graphical representation of all the possible combinations of two products that can be produced with the given resources and technology

part a exersise
Question 4. Discuss the subject matter of economics.

Answer Traditionally, the subject matter of economics has been studied under two branches i. e.,
(i) Micro Economics It IS that branch of economics, which studies the problems of an individual unit of an economy. Its main tools are demand and supply e.g, Individual income, Individual expenditure.
(ii) Macro Economics It is that branch of economics. which studies the economic problems at the level of an economy as a whole. It is concerned with determination of aggregate output and general price  level in the economy as a whole. Its main tools are aggregate demand and aggregate supply.

Question 5. Distinguish between a centrally planned economy and a market economy.

Answer Difference between Centrally Planned Economy and Market Economy

 S. No. Centrally Planned Economy Market Economy
1. It owned controlled and operated by the government It owned controlled and operated by the private sector.
2. All the means of production are owned by the government in case of centrally planned economy. All resources of production (land, labour , capital and enterprise) are private property .
3. Government plays the complete role. Government does not play any role.
4. The central palnning authority decides what, how and for whom to produce. The decision of what , how and for whom to produce through price mechanism.

Question 6. What do you understand by positive economic analysis?

Answer Positive economic analysis is confined to cause and effect relationship. In other words, it states “what is.” It relates to what the facts are, were or will be about various economic phenomena in the economics. e.q., it deals with the analysis of questions like what are the causes of unemployment.

Question 7. What do you understand by normative economic analysis?

Answer Normative economic analysis is concerned with what ‘ought to be’. It examines the real economic events from moral and ethical angles and judge whether certain economic events are desirable or undesirables. e.g., it deals with the analysis of questions like what should be the prices of food grains.

Question 8. Distinguish between Microeconomics and Macroeconomics.

Answer Difference between Microeconomics and Macroeconomics

Microeconomics Macroeconomics
Meaning It is that part of economics, which studies the economic problems of individual unit It is that part of economics, which studies the economic problems of aggregate level
Objective Its aim is determine the commodity price or factors of production for an individual firm its aim is to determine national income ,employment growth of nation  in the economy as a whole.
Tools its main tools are demand and supply its main tools are aggregate demand and aggregate supply
Level of aggregation it involves limited degree of aggregation it involves highest level of aggregation
Theory related theories are : theory of price and theory of consumer behavior related theories are : theory of multiprice and theory related to gap in economy

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